Currently, an estimated 6.7 million borrowers are delinquent or in foreclosure.  During a recent month, one in every 492 U.S. housing units received a foreclosure filing during the month.  Here are some simple steps that can make a big difference.

One example is the Hardest Hit Fund (HFA) an Obama administration initiative which is providing .5 billion to state agencies where house prices have fallen more than 20% from their peak.  To see if your state is participating go to:   http://www.treasury.gov/initiatives/financial-stability/housing-programs/hhf/Pages/default.aspx

Even if you don’t live in one of those states you may still qualify for aid.  If you aare a struggling homeowner, you can receive aid to bring your mortgage current, to reduce principal on an underwater mortgage or make your monthly payments while you are looking for work.  To find out what is available in your state go to the HUD website and look for “Avoiding Foreclosure:  Resources in Your State.”

A second thing is to seek help from your state’s Attorney General’s Office.  The attorneys general from all 50 states have put together a “bi-partisan multistate group” to investigate if faulty procedures, known as Robo-signing,  were used to sign foreclosures which led to evictions,  Several of the largest banks such GMAC in tandem with JPMorgan Chase and  Bank of America originally announced there were freezing repossessions in 23 states where court supervision of foreclosures is required.(Not all state require court action for foreclosures.)  Bank of America and Ally Bank have since extended the freeze to all 50 states.  But this information is constantly changing so it is important to get up to the minute information for your state.

A call to the consumer protection division of your state’s Attorney General’s Office or a visit to their website can provide you with up to date information about what is happening in your state.  For example, a recent visit in my home state of Massachusetts provided the following information.

Massachusetts Attorney General Martha Coakley has drafted legislation that would set standards and mandate loan modifications when it is financially beneficial for banks.  This bill establishes standards to ensure creditors undertake commercially reasonable efforts to avoid unnecessary foreclosure.

The bill aims to prevent additional foreclosures by mandating loan modifications in certain circumstances. Specifically, the loan modification legislation requires creditors to take commercially reasonable efforts to avoid foreclosure upon certain mortgage loans secured by homes that are occupied by the owners as their principal residencesCoakley’s office has brought predatory lending cases against two major subprime lenders, Fremont Investment & Loan/Fremont General and H&R Block/Option One Mortgage Corporation.

2. This past week, the Massachusetts Supreme Court ruled in two separate cases that banks have to have proof that they own a house before starting a foreclosure. In the past, banks were allowed to start the eviction process, and often even finish it, even if they didn’t have all the paperwork on hand that proved they, or their investors, owned the house. Only after the bank was challenged did it have to produce evidence that it had the right to foreclose.

The Massachusetts ruling will force banks to have all the documentation on every foreclosure before the process is started, or risk not being able to foreclose. The rising number of foreclosures has dramatically slowed the time it takes a bank to repossess a house from a little over eight months to nearly a year and a half. The Mass ruling, if followed around the country, could dramatically slow foreclosures further.

3. May 10, 2009, the Goldman Sachs Group agreed to pay up to million to end an investigation by the Massachusetts attorney general’s office into whether the firm helped promote unfair home loans in the state.  The settlement resulted from a continuing investigation by Attorney General Martha Coakley into subprime lending practices and the role of investment banks that acted as middlemen in loans that have resulted in foreclosure or contained terms so onerous that they were destined to fail.

The settlement will be used to reduce the mortgage payments of 714 Massachusetts residents who had secured subprime mortgages funded by Goldman Sachs.  The program requires Goldman to reduce the principal on first mortgages by up to 30 percent and on second mortgages by up to 50 percent.

Granted this seems like small potatoes but if you happen to be one of the 714 this is very good news.

A third thing you can do is to Not Accept the Foreclosure Notice as valid on its face.  When you receive a foreclosure notice do not accept it as a given. Due to the Robo signing scandal, there are major issues on how banks are handling the paperwork required to show how they took control of the note and if they have the authority to carry out foreclosure. You should contest, in writing, your foreclosure notice and make your lender show that they have the proper paperwork to foreclose on your property.

A fourth thing you can do is to Check Your Mortgage Assignment.An Assignment of Mortgage is a document which indicates that a mortgage has been transferred from the original lender or borrower to a third party.  Assignments of mortgage are more commonly seen when lenders sell mortgages to other lenders.  In order to begin the foreclosure process on a defaulting mortgage, lenders must, by law, be able to produce a sworn affidavit verifying that the bank owns the mortgage in question, and that the mortgage is at least six months in arrears.  

Banks have tried to speed up the foreclosure process by allowing outside companies to electronically sign off on thousands of mortgages a day. This practice is being widely challenged in court.   It might be a good idea to do a title search on your property and look at the mortgage assignments. Check the signatures of the “bank officer” (who may not be an employee of the bank at all) who signed and verify them. Robo signers have been exposed on many clients’ mortgage assignments. Chances are a Robo signer signed off on yours too!

Also check the dates of the Assignments to make sure your mortgage lender did not try to back date them. Banks have been producing “copies” of documents for which there are no originals. If the original sale of your mortgage, and all subsequent sales, were not processed correctly, or weren’t verified at each step that your mortgage was sold, then the bank cannot lawfully claim that it owns your mortgage.

A fifth thing you can do is to check your Deed of Trust to see what company has the authority to assign these documents.  Due to the recent banking crisis many small banks have closed their doors.  In many cases we have found that the company listed on the document was out of business or filed for bankruptcy before the documents were dated making any transfer of the note void.  Also check to see if MERS, the Mortgage Electronic Registration System, is listed as an assignor or assignee. There is case law suggesting that MERS cannot be an assignee or assignor.

The U.S. Department of Housing and Urban Development offers tips for avoiding foreclosure in the first place. HUD urges homeowners in an uncertain situation to not ignore the problem but talk to your lender as soon as you realize there is a problem. Also, do not ignore mail from your lender, know your mortgage rights and understand the options available to head off foreclosure!

If you face foreclosure or are trying to assess your options, you should first recognize that there is help out there. Then contact an experienced attorney licensed in your state who knows about loan modifications, short sales and other avoiding foreclosure options. Or you can contact me at info@all-things-conflict-resolution-and-adr.com.

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